[Federal Register Volume 60, Number 220 (Wednesday, November 15, 1995)]
[Rules and Regulations]
[Pages 57484-57496]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-28129]
[[Page 57483]]
_______________________________________________________________________
Part II
Department of Housing and Urban Development
_______________________________________________________________________
24 CFR Part 29
Nonjudicial Foreclosure of Single Family Mortgages; Final Rule
Federal Register / Vol. 60, No. 220 / Wednesday, November 15, 1995 /
Rules and Regulations
[[Page 57484]]
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
Office of the Secretary
24 CFR Part 29
[Docket No. FR-3799-F-02]
RIN 2501-AB86
Nonjudicial Foreclosure of Single Family Mortgages
AGENCY: Office of the Secretary, HUD.
ACTION: Final rule.
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SUMMARY: This rule makes final, with changes, the proposed amendments
to title 24 CFR by the addition of a new part 29 that concerns
nonjudicial foreclosure of single family mortgages. A proposed rule was
published on April 7, 1995 (60 FR 17968). The rule implements the
Single Family Mortgage Foreclosure Act of 1994 (the Act), codified at
12 U.S.C. 3751-3768, which authorizes the Secretary of Housing and
Urban Development, as a matter of Federal law, to exercise a statutory
nonjudicial power of sale with respect to any defaulted single family
mortgage held by the Secretary under title I or II of the National
Housing Act or under section 312 of the Housing Act of 1964.
It is important to note that the section numbers that are provided
in this final rule differ from the section numbers that appeared in the
proposed rule due to the abbreviation of the final rule so as not to
duplicate provisions already set forth in the Act.
EFFECTIVE DATE: December 15, 1995.
FOR FURTHER INFORMATION CONTACT: Bruce S. Albright, Office of the
General Counsel, Room 9258, Department of Housing and Urban
Development, Washington, DC 20410, (202) 708-0303. A telecommunications
device for the hearing impaired (TDD) is available at (202) 708-3259.
SUPPLEMENTARY INFORMATION: In the preamble to the proposed rule, the
Department stated that it would give consideration to issuing a much
briefer final rule to implement the Act. The Department has decided to
publish an abbreviated final rule. Rather than repeat the provisions of
the statute, the final rule contains only those provisions that are
necessary for clarification of the statutory procedures, or provisions
that address those areas that give the Secretary discretion to act. Of
course, the statutory requirements apply whether they are repeated in
the rule or not, and removal of the statutory requirements from the
regulation does not affect their applicability. In addition to
resulting in a more streamlined regulation, the removal of statutory
requirements makes rulemaking to update the language of the regulation
whenever there is a change in the statutory language unnecessary.
The combined statutory and regulatory procedures for conducting
nonjudicial foreclosures, which were contained in the proposed rule,
have been placed in an appendix to this final rule and incorporate
changes made in response to the comments received. The final rule will
be codified in the Code of Federal Regulations; the appendix will not
be codified. However, the appendix will be included in information to
be provided to foreclosure commissioners, and which will be available
to the public. HUD is striving to keep communications about
requirements as clear, simple and timely as possible, and the guide in
the appendix presents such a format.
By a delegation of authority published elsewhere in this issue of
the Federal Register, the authority under the Act to appoint a
foreclosure commissioner or commissioners and to fix the compensation
of commissioners has been delegated to the General Counsel of HUD. This
delegation of authority has been redelegated to the Field Assistant
General Counsel.
By a ``Notice of Application--Foreclosure Commissioners,'' which
will be published at the same time as this rule or as soon thereafter
as possible, the Department requests applications from parties who seek
approval for designation to act as foreclosure commissioners under the
Single Family Mortgage Foreclosure Act of 1994. The Department will
also perform additional outreach in order to encourage interested
parties to apply.
I. Changes Made at Final Rule Stage
In addition to removing text of the proposed rule that only
repeated statutory language, a number of changes are made in this final
rule. The definitions of ``record'' and ``recorded'' are clarified to
include within their meaning the terms ``file'' and ``filed.'' The
requirement in Sec. 29.101(d) of the proposed rule, that a copy of the
designation of the foreclosure commissioner must be mailed with the
Notice of Default and Foreclosure Sale, is removed. One item added by
this final rule at Sec. 29.103 to the information required to be
provided in the notice is the recordation date of the mortgage. The
presale reinstatement provisions of this rule, at Sec. 29.107, are
revised for consistency to use the term ``adjourned'' instead of
``postponed.'' The date of the recording of the mortgage that was
foreclosed is added to the required recitals in the record of
foreclosure and sale (Sec. 29.121).
II. Public Comments
The Department received nine public comments on the proposed rule
during the 60 day comment period that ended on June 7, 1995. The
comments were from two law firms, two financial institutions, two bar
associations, one legal services organization, one title insurers'
trade association, and one foreclosure trustees' association. The
following discussion summarizes the comments and provides HUD's
responses to those comments.
Comment: Support for the Act/Favoring the rule. One commenter
stated that the proposal to create a uniform foreclosure remedy
appeared to be in the best interest of all concerned parties. Another
commenter supported the concepts outlined in the proposed rule, but
felt that the rule could benefit from some ``fine tuning.''
Response: No response is necessary.
Comment: Scope of the final rule. One commenter commented that the
final rule that is published should be a complete and final rule,
rather than an abbreviated one. The commenter stated that there has
been considerable confusion in the legal community about the
codification of the nonjudicial foreclosure statute, given its
enactment in an appropriations bill. The commenter said that while a
HUD guidebook with the procedures for foreclosure commissioners to
follow would be useful, the commenter believed that a complete and
substantial final rule is justified because of the magnitude of changes
embodied in this new procedure, the pre-emption of State law, and the
national basis on which the statute is to be implemented.
Response: The Department is sensitive to the need for clear
instructions in a format that is easily accessible. At the same time,
the Department is concerned about excessive and unnecessary
regulations, and is taking steps to contain the growth of regulations
and reduce the number of regulations. The proposed rule repeated, for
the most part, the authority granted to the Secretary in the statute.
The Department has decided to publish an abbreviated final rule, which
will be codified in the Code of Federal Regulations. However, to ensure
adequate guidance to the public, an appendix to this final rule is also
being published. The appendix will reflect the proposed rule, revised
to incorporate comments.
Regarding concerns over the method of the statute's promulgation,
the effectiveness and the codification of this
[[Page 57485]]
nonjudicial foreclosure statute in the United States Code are not
affected because of the statute's promulgation in an appropriations
act.
Comment: Title insurance. One commenter stated that requests to
provide title insurance will be denied for properties where mortgages
had been foreclosed under the provisions of the Act if, in reliance
upon the statute, the State-imposed redemption period was ignored.
Because of this, the commenter advised against implementation of this
statutory authority.
Response: It is well settled that the Congress has the power to
enact such pre-emptive statutes. Section 814(e) of the Act (12 U.S.C.
3763(e)) specifically provides that there shall be no right of
redemption or right of possession based upon a right of redemption, in
the mortgagor or others subsequent to a foreclosure completed under the
provisions of the Act. Pre-emption of the right of redemption is not
new to foreclosures of Secretary-held mortgages. For example, section
204(l) of the National Housing Act, as amended, already pre-empts the
right of redemption for those situations where a Secretary-held
mortgage is foreclosed by the Secretary. The Department notes that
title insurance is available under the Multifamily Mortgage Foreclosure
Act (MMFA), which also pre-empts redemption rights.
Comment: Borrower protection/Process time. Three commenters noted
that the period of time after sending the Notice of Default and
Foreclosure Sale prior to the date of foreclosure was not sufficient
time for a response from the mortgagor and for the default to be
corrected. One commenter thought that what he found to be a brief
period of time seemed to conflict with the preamble statement that
``foreclosure will be commenced only after extensive attempts to
correct the default.'' One commenter raised concerns that the rule had
very few safeguards to protect affected borrowers, and recommended
distinguishing between occupied and abandoned properties, which have
differing degrees of deterioration. One commenter stated that there was
no opportunity to dispute the claimed amount owed.
Response: The time from the sending of the Notice until the
foreclosure is not unfair to the mortgagor, and does not preclude the
mortgagor from correcting a default. In each case with a Title I, Title
II or section 312 mortgage, the mortgagor has had ample opportunity to
correct the default and avoid foreclosure. Prior notice has been sent
to the mortgagor, a payment plan may have been entered into, and the
mortgagor has had the opportunity to contest the amount owed and been
given the opportunity to convey the property to HUD without proceeding
with foreclosure. The Notice of Default and Foreclosure Sale is only
the culmination of a process whereby HUD has attempted to work with the
debtor to resolve the default and to work out arrangements whereby
foreclosure could be avoided.
A more detailed discussion, which follows, of the acquisition and
servicing of Secretary-held mortgages illustrates the effort that the
Department undertakes to assist homeowners avoid foreclosure.
Most Title II mortgages are acquired pursuant to section 230 of the
National Housing Act. Under this section, a mortgagor who has defaulted
on his mortgage due to circumstances outside his control may seek to
have his mortgagee assign the mortgage to HUD to avoid foreclosure and
attempt to save his home. If HUD finds that certain criteria are met,
the mortgagee assigns the mortgage to HUD and collects the mortgage
insurance benefits. Among the criteria is the requirement that the
mortgagor be able to resume full monthly mortgage payments no later
than the 37th month after the assignment, and must be able to pay the
mortgage in full at the end of the mortgage term, which may be extended
up to ten years to cover the arrearage. If the mortgagor cannot resume
and continue making full monthly payments after 36 months, or fails to
perform under the terms of a forbearance agreement, the Department
initiates foreclosure. A mortgagor under this program who faces
foreclosure has not just recently defaulted on his mortgage. Rather, he
may have been in default for more than three years. The Department has
been in contact with each such mortgagor to work out a solution to the
default. When no resolution is worked out, it will be no surprise to
the mortgagor that HUD is foreclosing.
A Title I home improvement loan that is secured by a security
interest in the secured property is assigned to the Department for the
payment of insurance benefits after default by the borrower. After a
default, the lender attempts to work with the borrower to collect the
delinquent payments. If the loan cannot be brought current, the loan
balance is accelerated and the note and mortgage are assigned to HUD.
It is important to note that the lender has a choice--it can proceed
against the security and forego submitting a claim to HUD, or it can
assign the loan to HUD and receive insurance benefits. Once HUD
acquires the loan, it is sent to a HUD Debt Management Center for
collection activities. The Department attempts to work out payment
plans with all Title I debtors, including those where HUD has a junior
lien interest securing the Title I loans. Prior to issuing a Notice of
Intent to Foreclose to a Title I debtor, the Debt Management Center has
taken numerous steps to attempt to collect the delinquent debt. A
series of demand letters is sent to the debtor requesting payment. The
Debt Management Center reviews the account to see if a realistic
payment plan can be implemented, or if assets are available that could
liquidate the debt. Based on its review, the Debt Management Center may
accept a compromise offer from the debtor. Again, because there have
been numerous contacts with the mortgagor, it cannot be said that
attempts at collection culminating with foreclosure surprise the Title
I mortgagor and deprive him of the means to work out the problem.
Section 312 mortgage loans are serviced by a contract servicer, who
also maintains close contact with the mortgagors. As with the Title I
and Title II mortgagors, there are opportunities to work out default
problems, and it is not until four official notices have been issued to
the borrower over a 90-day period and all attempts to work with the
borrower have failed, that the process begins for referral to the
foreclosure commissioner. A delay of 30 to 60 days will occur before
the section 312 loan reaches the foreclosure commissioner, during which
time the borrower may have an opportunity to reinstate. Therefore, the
borrower may have up to 150 days prior to the 21 day notice in which to
bring the loan current or negotiate a forbearance agreement.
In short, internal procedures that the Department has in place
which are used prior to initiating foreclosure provide that the
mortgagor will have had numerous attempts to address the default under
the mortgage, both with HUD staff and with the prior mortgagee. In
addition, under the Title I, Title II and Section 312 servicing
procedures, there are continuing opportunities to raise and resolve
disputed amounts.
Comment: Time of notice. One commenter recommended that the mailing
date of the notice should be closer to the date of the search of the
records rather than the 45 days before the scheduled sale date, as
provided in the proposed rule, to allow for adequate notice of
lienholders who may file a lien between the 45 days (maximum time for
search) and the 21 days (minimum time for notice to be sent).
Response: If the lienholder of such a lien does not receive notice,
the lien
[[Page 57486]]
would remain and would have to be cleared. The Department believes that
the occurrences of such liens during this time frame would be rare.
Should experience show that this becomes a recurrent issue, the
Department can request the foreclosure commissioners to make additional
searches of the records prior to the 21 day mailing of the notices. The
Department also notes that searches actually may be conducted less than
45 days before the sale and the notice may be sent further in advance
than 21 days. HUD may also adjust the number of days in the
Instructions to be issued to foreclosure commissioners.
Comment: Due process/Retroactive effect of statute. One commenter
attached a memorandum from a Title Insurance Company that expressed
concerns about the applicability of the Act to mortgages executed prior
to the Act's enactment as well as to the absence of a requirement for a
hearing before an impartial tribunal prior to foreclosure.
Another commenter raised questions about the retroactive
application of the statute. The commenter felt that retroactive
application would hurt mortgagors who relied on the availability of
their State's foreclosure procedures when entering into their
mortgages, and that failure to honor those procedures could raise due
process concerns. In addition, the commenter said that persons most
adversely affected are those who requested HUD assignments of their
mortgage before the new regulation, relying on HUD foreclosure
procedures identical to those in their State.
Response: Regarding the retroactive application of the statute, the
Department notes that similar questions were raised with regard to
multifamily mortgages foreclosed pursuant to the Multifamily Mortgage
Foreclosure Act of 1981 (MMFA). The MMFA's retroactive effect has been
upheld in court. In addition, the Department emphasizes that it is
clear that Congress intended that the Act have retroactive effect. For
example, the Act covers the foreclosure of section 312 loans made by
the Secretary, although the authority to make such loans was repealed
by section 289 of the Cranston-Gonzalez National Affordable Housing Act
in 1990.
With regard to the comment about mortgagors relying on certain
foreclosure procedures, the Department questions whether mortgagors,
upon entering into mortgage contracts, actually consider what
foreclosure procedures will be used in the event of default.
Furthermore, the Department emphasizes that mortgagors whose mortgages
are in default and that are assigned to the Department under section
230 of the National Housing Act (and it is these mortgages that
constitute almost all of the mortgages that will be foreclosed under
this Act and regulation) generally receive forbearance relief for a
number of years that greatly exceeds the amount of time that would be
expended if the mortgages had not been assigned and had been foreclosed
earlier by mortgagees using the State foreclosure procedures.
Regarding the comment that the mortgagor should have an informal
hearing before a foreclosure is initiated under these procedures, the
Department is not insensitive to the need to deal with mortgagors
fairly and to give them opportunities to correct deficiencies and to
question the amount owed. As discussed previously, foreclosure of a
Secretary-held mortgage does not come as a surprise to any mortgagor. A
mortgagor whose mortgage is held by HUD has been in contact with the
Department in regard to forbearance, reduced payment plans and other
assistance before foreclosure is initiated. A foreclosure occurs only
as a last resort when the mortgagor is unable or unwilling to make
mortgage payments.
Comment: Notice of new procedures. One commenter urged that if the
statute and rule are to be applied retroactively, mortgagors who have
HUD-insured mortgages should be given actual notice of the new
procedure immediately and again, if there is a default, at the time
information about the assignment program is provided. The commenter
urged that HUD wage an aggressive public information campaign,
including a bilingual information booklet.
Response: The Department plans to give notice of the new
foreclosure procedures to all single-family mortgagors whose mortgages
are held by the Secretary. The Department also intends to inform each
mortgagor accepted into the Title II Assignment program that this new
procedure may be used to foreclose the HUD-held mortgage if foreclosure
becomes necessary. The Department also intends to require new language
to be added to the Title II security instruments used by mortgagees to
provide that if the Department acquires the mortgage, the nonjudicial
foreclosure procedures may be used. The Department will not separately
notify all Title II mortgagors whose existing mortgages are insured
(rather than held) by HUD-FHA of the new procedures, but those
mortgagors will be informed if they default on their insured mortgage
loans and are accepted into the assignment program.
Comment: Other foreclosure procedures. One commenter asserted that
the rule would increase the amount of time, add requirements, and
increase the costs associated with a foreclosure in the commenter's
State, where a nonjudicial procedure for foreclosure is already in
place under State law. The commenter stated that the rule would
adversely affect lending practices in his State. The commenter urged
that the new procedures should be limited to judicial foreclosure
States, and should only apply to HUD-held loans, and not insured loans.
Response: The commenter has expressed a common misconception about
this rule. The Act, and hence the rule, applies to mortgage loans that
were previously insured, and are held by HUD as a result of an
assignment in exchange for the payment of insurance benefits. The rule
also applies to secured Title I loans, Section 312 mortgage loans and
some Title II loans that were made with the Secretary as mortgagee. It
does not apply to mortgages presently insured by HUD. In addition, the
statute gives the Secretary the option of using this new procedure or
using any other procedures available under State or Federal law.
Comment: Reinstatement. One commenter stated that the pre-sale
reinstatement as a matter of right should not be limited to a single
instance, but should be permitted at any time before the sale.
Response: The authority for this regulatory provision is contained
in the statute, see 12 U.S.C. 3759(a)(2). As previously noted, the
mortgages in question are in default, and have been in default for long
periods of time. The mortgagors in such instances have been informed
previously by the Department that HUD would foreclose unless their
accounts were brought current, or their accounts had been brought
current and then fell behind again repeatedly. The statute seeks to
curb such abuses.
Comment: Deficiency judgment. A commenter raised the concern that a
borrower would have to take action to set aside an unfair deficiency
judgment.
Response: The deficiency judgment provisions in the statute and the
regulations are not automatic. The Secretary has discretion about
referring a case for a deficiency judgment action.
Comment: Fees. The Department was urged to conduct a study to
determine what would be a reasonable fee for outside services in
conducting foreclosures of HUD-held mortgages. The commenter noted that
on two previous occasions, the Department had contracted for management
of its foreclosure processes and had accepted
[[Page 57487]]
bids that were unreasonably low, with unsatisfactory results.
Response: Under a Delegation and Redelegation of Authority
published elsewhere in this issue of the Federal Register, HUD's Field
Assistant General Counsel will have authority to designate foreclosure
commissioners under the Act and to determine compensation. It is
anticipated that the foreclosure commissioners will generally be local
law firms or other entities. Compensation will be determined by each
Field Assistant General Counsel based upon information received and
recommendations made to them about what constitutes reasonable
compensation for handling foreclosures in particular geographic areas.
In these and other ways, procedures under the Act are considerably
different from procedures referred to by the commenter that were
previously used for HUD's single family mortgage foreclosures.
Comment: Guidebook availability. One commenter stated that making a
guidebook available to the public would be invaluable inasmuch as
questions would arise concerning why the foreclosure was not being done
in conformity with State law, and would serve as the only viable
resource of information for anyone who wished to learn about the HUD
nonjudicial foreclosure process.
Response: The Department believes that such a guidebook is not
necessary because the guidelines are contained in the appendix to this
final rule.
Comment: Definitions. One commenter felt that the definition of
``owner'' was too broad, and suggested that the term should be limited
to a recorded interest in the property.
Response: The definition in the proposed rule is derived from the
statute.
Comment: Designation of foreclosure commissioner. One commenter
recommended selecting foreclosure commissioners from the U.S.
Foreclosure Network, an organization whose members must meet certain
criteria of professionalism.
Response: Members of this organization may apply pursuant to the
procedures established under the Notice of Application that is being
published in the Federal Register.
Comment: Natural person as foreclosure commissioner. Concern was
expressed by one commenter about having a natural person act as a
foreclosure commissioner and potential problems arising, such as death
or illness. The commenter recommended using a natural person only if
another type of qualified legal entity was not available.
Response: The statute authorizes the designation of a natural
person or an entity that is not a natural person, and the Department
will proceed accordingly in designating foreclosure commissioners.
Other statutory provisions set forth procedures for designating
substitute foreclosure commissioners, if necessary. Should a
foreclosure commissioner who is a natural person die, become ill, or
should another problem arise, the Field Assistant General Counsel may
always designate a substitute foreclosure commissioner.
Comment: Copy of designation. Two commenters observed that
attaching a copy of the designation of the foreclosure commissioner to
the Notice of Default and Foreclosure Sale does not seem necessary and
involves additional costs.
Response: Attachment of a copy of the designation is not a
statutory requirement. Because the Notice of Default and Foreclosure
Sale must include the name, address and telephone number of the
foreclosure commissioner, HUD will not require attachment of the
designation with each notice.
Comment: Notice of Default and Foreclosure Sale. One commenter
asked if the notice should set forth the name of the trustee if the
security instrument being foreclosed is a deed of trust.
Response: The foreclosure commissioner named by HUD will function
as a substitute trustee in the place of any previously named trustee.
Comment: One commenter recommended that the notice should indicate
that the sale is made without covenant or warranty.
Response: This will be included in the Instructions to the
foreclosure commissioner.
Comment: A commenter suggested that the notice should state the
recording date of the mortgage rather than the ``date of the
mortgage.''
Response: The statute provides at 12 U.S.C. 3757(5) that the Notice
of Default and Foreclosure shall contain ``the date of the mortgage * *
*.'' Providing the recordation date as well as the execution date may
be useful, and this requirement has been added to the abbreviated rule
(Secs. 29.103 and 29.121) and appendix (Secs. 7 and 17).
Comment: A commenter suggested that there should be clarification
of the words ``earliest principal installment remaining wholly
unpaid,'' noting that most installments are principal and interest, and
it would seem that even a partially unpaid installment should be
reflected.
Response: Statutory language provides for ``the due date of the
earliest installment payment remaining wholly unpaid * * *.'' (emphasis
added).
Comment: A commenter suggested that the amount or percentage of the
deposit that would be required, and the time that the winning bidder
has to pay the balance of the purchase price, should be specified in
the final rule.
Response: These points will be covered in other guidance that is to
be given to the foreclosure commissioners and to HUD Field Offices. It
is not covered in the final rule, which is an abbreviated rule.
Comment: Service of Notice of Default and Foreclosure. One
commenter noted that in paragraph (a) of Sec. 29.109 of the proposed
rule, the term ``filing'' appears to refer to recording. Since the term
``recording'' is used later, it should be used consistently. The
commenter also pointed out that there may be a question whether the
Notice of Default would be filed ``in the manner authorized for filing
a notice of an action.''
Response: The statute uses the terms ``filed'' and ``filing'' and
in this context, they are used interchangeably with ``record'' and
``recorded.'' Nevertheless, to avoid confusion, the terms ``record''
and ``recorded'' are used in the Appendix.
Comment: A commenter noted that in paragraph (b)(1)(i) of
Sec. 29.109 of the proposed rule, the ``last known address'' should be
defined as the last address known to the Secretary or the foreclosure
commissioner.
Response: ``Last known address'' is statutory language. The meaning
has been clarified, as suggested, in the appendix which follows this
final rule.
Comment: A commenter noted in subparagraph (b)(1)(ii) of
Sec. 29.109 of the proposed rule, that sending notice to ``all
subsequent mortgagors of record'' would be unnecessary since they would
no longer have an interest and a current address would not be
available.
Response: The statute at 12 U.S.C. 3758(2)(A)(ii) requires notice
to ``[a]ll mortgagors of record or other persons who appear on the
basis of the record to be liable for part or all of the mortgage debt *
* *.'' This provision is contained in the appendix, and HUD will
request foreclosure commissioners to attempt to effectuate service of
notice by mail to the original mortgagor and subsequent mortgagors of
record, unless HUD has released them from any obligation under the note
and mortgage.
Comment: A commenter stated that notice to senior lienholders would
seem unnecessary.
[[Page 57488]]
Response: The statute at 12 U.S.C. 3758(2)(A)(iv) provides that
service of notice of the foreclosure sale shall be served upon all
persons holding liens of record upon the secured property as the record
existed 45 days before that date originally set for the foreclosure
sale.
Comment: The commenter suggested that consistently posting a notice
of the foreclosure sale on the property would avoid questions of proper
notice, rather than the limited posting required if the property
contains multiple dwelling units or the occupants of the security
property are unknown.
Response: HUD is concerned that posting notice on the property for
every foreclosure might lead to vandalism and increased deterioration
of the property. The posting provisions are contained in the statute to
ensure additional notice under limited circumstances. This same issue
arose when this statutory language was drafted and it was noted that
posting of notice is not a universal requirement.
Comment: A commenter raised concerns about the proof of mailing
date. The commenter stated that proof of mailing would be difficult to
establish if the commissioner used a postage meter. It was suggested
that the commissioner could be required to prepare an affidavit of
mailing.
Response: Under 12 U.S.C. 3758(2)(A), ``[t]he notice of foreclosure
sale shall be sent by certified or registered mail, postage prepaid and
return receipt requested * * * .'' The post office stamped receipt of
the mailing, with the postal date stamp, is adequate proof of the
mailing of the notice.
Comment: One commenter raised concerns about the cost of publishing
the Notice of Default and Foreclosure Sale, and questioned whether
publication accomplished any purpose.
Response: This is a statutory requirement.
Comment: Presale reinstatement. One commenter observed that
paragraph (b) of Sec. 29.111 of the proposed rule refers to a sale
postponement of 14 days and says that notice of the rescheduled sale
shall be served as described in Sec. 29.109 of the proposed rule.
However, Sec. 29.109 requires three weeks of publication. The commenter
suggested that Sec. 29.115 of the proposed rule, which deals with
adjournment or cancellation of a sale, should be referenced rather than
Sec. 29.109, which deals with service of the Notice of Default and
Foreclosure Sale.
Response: The commenter is correct and an appropriate change has
been made to Sec. 29.107(d) of this final rule, which also specifies
that the sale may be cancelled in addition to being postponed.
Conforming changes have been made to the appropriate provisions
contained in the appendix.
Comment: Adjournment or Cancellation of Sale. One commenter
suggested eliminating the cost of publication required by paragraph (c)
of proposed Sec. 29.115 by providing for an oral postponement as well
as mail notification to bidders who had submitted sealed bids.
Response: This is a statutory requirement.
Comment: One commenter noted that paragraph Sec. 29.115(c) of the
proposed rule uses the word ``adjourned,'' instead of ``postponed,''
which is the term used in Sec. 29.111(b) of the proposed rule.
Response: This provision is now contained in both Sec. 29.107(d)
and the appendix, and ``adjourned'' has been substituted for
``postponed''.
Comment: Disposition of Sale Proceeds. One commenter questioned the
use of surplus funds from the sale in paragraph (a)(3) of Sec. 29.121
of the proposed rule for payments of liens that are prior to the
mortgage being foreclosed. The commenter stated that this would seem to
conflict with the provisions of many security documents and probably is
not what would be considered to be normal practice.
Response: This is a statutory requirement. In many cases, these
prior liens will be in the nature of taxes, water and sewer liens, and
the like. For Title I loans that are foreclosed, the liens may be
senior mortgages.
Comment: A commenter suggested that a period of time for which
records of the sale should be kept should be specified.
Response: The department's instructions to the foreclosure
commissioners may specify the period of time for record retention.
Comment: Record of Foreclosure and Sale. One commenter noted that
in subparagraph (a)(3) of Sec. 29.127 of the proposed rule, the date
the mortgage was recorded should be used rather than the date of the
mortgage.
Response: This requirement is statutory; see 12 U.S.C. 3764(a)(2).
However, the Department agrees that this additional information would
be useful, and this is included in this final rule at Sec. 29.121 and
in the appendix.
Comment: One commenter suggested that it seems to be unnecessary to
attach the names and addresses of the parties to whom notice was
mailed, as set forth in subparagraph (a)(4) of Sec. 29.127 of the
proposed rule, as long as a recital relative to the proper mailing of
notices is included in the other recitals.
Response: This is a statutory requirement. See 12 U.S.C.
3764(a)(3).
Comment: Recordation of affidavit and addendum. One commenter
stated that the recitations contained in Sec. 29.127(a) of the proposed
rule should be recorded in the public records. The current language of
the proposed rule may be interpreted to read that the commissioner can
make the recitations in an affidavit or addendum, which need not be
recorded with the deed. The commenter recommended that this language
should be clarified to make it clear that the information should be
recorded in the public records, in the deed or an affidavit or addendum
to the deed.
Response: It is the Department's intent that this information be
recorded, whether contained in the deed itself, or an affidavit or
addendum. This will be clarified in the instructions to the
commissioners.
Comment: Effect of sale. Section 29.127(c) of the proposed rule
provides that a sale made and conducted under the provisions of the Act
shall bar the interest of any person whose interest was not docketed or
recorded before the date on which the notice of the foreclosure sale
``was first served by publication.'' One commenter suggested that for
consistency, this wording might be replaced with the wording set forth
in Sec. 29.109(b)(1).
Response: This is a statutory requirement. See section 816(3) of
this Act.
III. Other Matters
Environmental Impact
In accordance with 40 CFR 1508.4 of the CEQ regulations and 24 CFR
50.20 of the HUD regulations, the policies and actions in this document
are determined not to have the potential of having a significant impact
on the quality of the human environment and therefore further
environmental review under the National Environmental Policy Act is not
necessary.
Regulatory Flexibility Act
The Secretary, in accordance with the Regulatory Flexibility Act (5
U.S.C. 605(b)), has reviewed this final rule before publication and, by
approving it, certifies that this proposed rule would not have a
significant economic impact on a substantial number of small entities.
The final rule is limited to implementation of statutory authority for
the nonjudicial foreclosure of HUD-held single family mortgages, and
there are no unusual procedures that would need to be complied with by
small entities.
[[Page 57489]]
Executive Order 12606, the Family
The General Counsel, as the Designated Official under Executive
Order 12606, the Family, has determined that this final rule would not
have potential significant impact on family formation, maintenance, and
general well-being, and thus is not subject to review under the Order.
The final rule implements procedures for the nonjudicial foreclosure of
HUD-held single family mortgages. These procedures would impact those
families who would be required to vacate more quickly than under other
procedures. However, this impact is expected to be small, and would be
offset by the benefit to families to the extent that these procedures
decrease the risk to single-family housing of vandalism, fire loss,
depreciation, and damage and waste, and the attendant adverse effects
on the neighborhoods in which the properties are located.
Executive Order 12512, Federalism
The General Counsel, as the Designated Official under section 6(a)
of Executive Order 12612, Federalism, has determined that although this
final rule would have an effect on States or their political
subdivisions, and the relationship between the Federal government and
the States, the provisions of this final rule do not have ``federalism
implications'' within the meaning of the Order because the authorizing
statute provides for the preemption of State law.
List of Subjects in 24 CFR Part 29
Foreclosures, Mortgages.
Accordingly, title 24 CFR is amended by adding a new part 29,
consisting of subparts A and B, to read as follows:
PART 29--NONJUDICIAL FORECLOSURE OF SINGLE FAMILY MORTGAGES
Subpart A--General
Sec.
29.1 Purpose, scope and applicability.
29.3 Definitions.
Subpart B--Procedures
29.101 Designation of foreclosure commissioner and substitute
commissioner.
29.103 Notice of default and foreclosure sale.
29.105 Service of Notice of Default and Foreclosure Sale.
29.107 Presale reinstatement.
29.109 Conduct of sale.
29.111 Adjournment or cancellation of sale.
29.113 Foreclosure costs.
29.115 Disposition of sales proceeds.
29.117 Transfer of title and possession.
29.119 Redemption rights.
29.121 Record of foreclosure and sale.
29.123 Deficiency judgment.
Authority: 12 U.S.C. 1715b, 3751-3768; 42 U.S.C. 1452b, 3535(d).
Subpart A--General
Sec. 29.1 Purpose, scope and applicability.
(a) Purpose. The purpose of this part is to implement requirements
for the administration of the Single Family Mortgage Foreclosure Act of
1994 (the Act), 12 U.S.C. 3751-3768, that clarify, or are in addition
to, the requirements contained in the Act.
(b) Scope. The Secretary may foreclose on any defaulted single
family mortgage described in the Act regardless of when the mortgage
was executed.
(c) Applicability. The Secretary may, at the Secretary's option,
use other procedures to foreclose defaulted single family mortgages,
including judicial foreclosure in State or Federal Court, and
nonjudicial foreclosures under State law or any other Federal law. This
part applies only to foreclosure procedures authorized by the Act and
not to any other foreclosure procedures the Secretary may use.
Sec. 29.3 Definitions.
The definitions contained in the Act (at 12 U.S.C. 3752) shall
apply to this part, in addition to and as further clarified by the
following definitions. As used in this part--
Act means the Single Family Mortgage Foreclosure Act of 1994.
County means a political subdivision of a State or Territory of the
United States, created to aid in the administration of State law for
the purpose of local self government, and includes a parish or any
other equivalent subdivision.
Mortgage is as defined in the Act except that the reference to
property as ``(real, personal or mixed)'' means ``any property (real or
mixed real and personal).''
Mortgage Agreement is as defined in the Act, and also means any
other similar instrument or instruments creating the security interest
in the real estate for the repayment of the note or debt instrument.
Mortgagor is a defined in the Act, except that the reference to
``trustee'' mean ``trustor.''
Record; Recorded means to enter or entered in public land record
systems established under State statutes for the purpose of imparting
constructive notice to purchasers of real property for value and
without knowledge, and includes ``register'' and ``registered'' in the
instance of registered land, and ``file'' and its variants in the
context of entering documents in public land records.
Secretary means the Secretary of Housing and Urban Development,
acting by and through any authorized designee exclusive of the
foreclosure commissioner.
Security Property is as defined in the statute except that the
reference to property as ``(real, personal or mixed)'' means ``any
property (real or mixed real and personal).''
Subpart B--Procedures
Sec. 29.101 Designation of foreclosure commissioner and substitute
commissioner.
(a) The Secretary may designate foreclosure commissioners,
including substitute commissioners, as set forth in the Act.
(b) The method of selection and determination of the qualifications
of the foreclosure commissioner shall be at the discretion of the
Secretary. The execution of a designation pursuant to this section
shall be conclusive evidence that the commissioner selected has been
determined to be qualified by the Secretary. The designation is
effective upon execution.
Sec. 29.103 Notice of default and foreclosure sale.
(a) The foreclosure commissioner shall commence the foreclosure
under the procedures set forth in the Act.
(b) The Notice of Default and Foreclosure Sale (Notice) shall
include, in addition to the provisions as required by the Act:
(1) The foreclosure commissioner's telephone number;
(2) The legal description of the security property as contained in
the mortgage instrument;
(3) The date the mortgage was recorded;
(4) Identification of the failure to make payment, including the
entire amount delinquent as of a date specified, a statement generally
describing the other costs that must be paid if the mortgage is to be
reinstated, the due date of the earliest principal installment payment
remaining wholly unpaid as of the date on which the notice is issued
upon which the foreclosure is based, or a description of any other
default or defaults upon which foreclosure is based, and the
acceleration of the secured indebtedness; and
(5) The bidding and payment requirements for the foreclosure sale,
including the time and method of payment of the balance of the
foreclosure purchase price, that all deposits and the balance of the
purchase
[[Page 57490]]
price shall be paid by certified or cashier's check, and that no
deposit will be required of the Secretary when the Secretary bids at
the foreclosure sale.
Sec. 29.105 Service of Notice of Default and Foreclosure Sale.
(a) The Notice of Default and Foreclosure Sale shall be served in
accordance with the provisions of the Act. When notice is sent by mail,
multiple mailings are not required to be sent to any party with
multiple capacities, e.g., an original mortgagor who is the security
property owner and lives in one of the units. The date of the receipt
for the postage paid for the mailing may serve as proof of the date of
mailing of the notice.
(b) Notice need not be mailed to any mortgagors who have been
released from all obligations under the mortgage.
Sec. 29.107 Presale reinstatement.
(a) The foreclosure commissioner shall withdraw the security
property from foreclosure and cancel the foreclosure sale only in
accordance with the provisions of the Act and as more fully provided in
this section, in regard to presale reinstatements.
(b) To obtain a presale reinstatement in cases involving a monetary
default, there must be tendered to the foreclosure commissioner before
public auction is completed all amounts which would be due under the
mortgage agreement if payments under the mortgage had not been
accelerated and all costs of foreclosure incurred for which payment
from the proceeds of foreclosure is provided in the Act, and the
foreclosure commissioner must find that there are no nonmonetary
defaults; provided, however, that the Secretary may refuse to cancel a
foreclosure sale pursuant to this paragraph if the current mortgagor or
owner of record has, on one or more previous occasions, caused a
foreclosure of the mortgage, commenced pursuant to this part or
otherwise, to be canceled by curing a default.
(c) To obtain a presale reinstatement in cases involving a
nonmonetary default:
(1) The foreclosure commissioner, upon application of the mortgagor
before the date of foreclosure sale, must find that all nonmonetary
defaults are cured and that there are no monetary defaults; and
(2) There must be tendered to the foreclosure commissioner before
public auction is completed all amounts due under the mortgage
agreement (excluding all amounts which would be due under the mortgage
agreement if the mortgage payments had been accelerated), including all
amounts of expenditures secured by the mortgage and all costs of
foreclosure incurred for which payment would be made from the proceeds
of foreclosure as provided in the Act.
(d) Before withdrawing the security property from foreclosure, the
foreclosure commissioner shall notify the Secretary of the proposed
withdrawal by telephone or other telecommunication device and shall
also provide the Secretary with a written statement of the reasons for
the proposed withdrawal along with all documents submitted by the
mortgagor in support of the proposed withdrawal. Upon receipt of this
statement, the Secretary shall have ten (10) days in which to
demonstrate why the security property should not be withdrawn from
foreclosure, and if the Secretary makes this demonstration, the
property shall not be withdrawn from foreclosure. The Secretary shall
provide the mortgagor with a copy of any statement prepared by the
Secretary in opposition to the proposed withdrawal at the same time the
statement is submitted to the foreclosure commissioner. If the
Secretary receives the foreclosure commissioner's written statement
less than 10 days before the scheduled foreclosure sale, the sale shall
automatically be adjourned for 14 days, during which time it may be
cancelled. Notice of the re-scheduled sale, if any, shall be served as
described in Sec. 29.111.
Sec. 29.109 Conduct of sale.
(a) The foreclosure sale shall be conducted in a manner and at a
time and place as identified in the Notice of Default and Foreclosure
Sale and in accordance with the provisions of the Act.
(b) The foreclosure commissioner shall attend the foreclosure sale
in person or, if the commissioner is not a natural person, through a
duly authorized employee. If more than one commissioner has been
designated, at least one shall attend the sale.
(c) In addition to bids made in person at the sale, the foreclosure
commissioner shall accept written one-price sealed bids from any party,
including the Secretary, for entry by announcement at the sale so long
as those bids conform to the requirements described in the Notice of
Default and Foreclosure Sale. The foreclosure commissioner shall
announce the name of each such bidder and the amount of the bid. The
commissioner shall accept oral bids from any party, including parties
who submitted one-price sealed bids, if those oral bids conform to the
requirements in the Notice of Default and Foreclosure Sale. Before the
close of the sale the commissioner shall announce the amount of the
high bid and the name of the successful bidder. If the successful
bidder fails to comply with the terms of the sale, the HUD Field Office
representative will provide instructions to the commissioner about
offering the property to the second highest bidder, or having a new
sale, or other instruction at the discretion of the HUD representative.
(d) Prohibited participants. Relatives of the foreclosure
commissioner who may not bid include parents, siblings, spouses and
children. A related business entity that may not bid or whose employees
may not bid is one whose relationship (at the time the foreclosure
commissioner is designated and during the term of service as
foreclosure commissioner) with the entity of the foreclosure
commissioner is such that, directly or indirectly, one entity
formulates, directs, or controls the other entity; or has the power to
formulate, direct, or control the other entity; or has the
responsibility and authority to prevent or promptly to correct, the
offensive conduct of the other entity.
(e) Auctioneers. If the commissioner employs an auctioneer to
conduct the foreclosure sale, the auctioneer must be a licensed
auctioneer, an officer of State or local government, or any other
person who commonly conducts foreclosure sales in the area in which the
security property is located.
Sec. 29.111 Adjournment or cancellation of sale.
(a) The foreclosure commissioner may, before or at the time of the
foreclosure sale, adjourn or cancel the foreclosure sale in accordance
with the provisions of the Act. The publication of Notice of Default
and Foreclosure Sale, revised pursuant to the Act, may be made on any
of three consecutive days prior to the revised date of foreclosure sale
so long as the first publication is made at least seven days before the
date to which the sale has been adjourned. The commissioner shall, in
the case of a sale adjourned to a later date, mail a copy of the
revised Notice of Default and Foreclosure Sale to the Secretary at
least seven days before the date to which the sale has been adjourned.
(b) When a substitute commissioner is designated by the Secretary
to replace a previously designated foreclosure commissioner, the sale
shall continue without prejudice unless the substitute commissioner
finds, in that commissioner's sole discretion, that continuation of the
foreclosure sale will unfairly affect the interests of the
[[Page 57491]]
mortgagor. Any such finding shall be in writing. If the substitute
commissioner makes such a finding, the substitute commissioner shall
cancel or adjourn the sale.
Sec. 29.113 Foreclosure costs.
A commission may be allowed to the foreclosure commissioner
notwithstanding termination of the sale or appointment of a substitute
commissioner before the sale takes place.
Sec. 29.115 Disposition of sales proceeds.
The foreclosure commissioner will keep such records as will permit
the Secretary to verify the costs claimed, and otherwise to enable the
Secretary to audit the foreclosure commissioner's disposition of the
sale proceeds.
Sec. 29.117 Transfer of title and possession.
(a) If the Secretary is the successful bidder, the foreclosure
commissioner shall issue a deed to the Secretary upon receipt of the
amount needed to pay the costs of tax liens and prior liens, as set
forth in 12 U.S.C. 3762 (a)(2) and (a)(3). If the Secretary is not the
successful bidder, the foreclosure commissioner shall issue a deed to
the purchaser or purchasers upon receipt of the entire purchase price
in accordance with the terms of the sale as provided in the Notice of
Default and Foreclosure Sale.
(b) The register of deeds or other appropriate official in the
county where the property is located shall, upon tendering of the
customary recording fees, accept all instruments pertaining to the
foreclosure which are submitted by the foreclosure commissioner for
recordation. The instruments to be accepted shall include, but not be
limited to, the foreclosure commissioner's deed. If the foreclosure
commissioner elects to include the recitations required under the Act
(12 U.S.C. 3764) in an affidavit or an addendum to the deed, the
affidavit or addendum shall be accepted along with the deed for
recordation. The Clerk of the Court or other appropriate official shall
cancel all liens as requested by the foreclosure commissioner.
Sec. 29.119 Redemption rights.
Only for purposes of redemption rights under the Act, a foreclosure
shall be considered completed upon the date and at the time of the
foreclosure sale.
Sec. 29.121 Record of foreclosure and sale.
The statements regarding the foreclosed mortgage required to
establish a sufficient record shall include the date the mortgage was
recorded. The statements regarding the service of the Notice of Default
and Foreclosure Sale shall include the names and addresses of the
persons to whom the Notice was mailed and the date on which the Notice
was mailed, the name of the newspaper in which the Notice was published
and the dates of publication, and the date on which service by posting,
if required, was accomplished.
Sec. 29.123 Deficiency judgment.
If the price at which the security property is sold at the
foreclosure sale is less than the unpaid balance of the debt secured by
such property after disposition of sale proceeds in accordance with the
order of priority provided under the Act, the Secretary may refer the
matter to the Attorney General who may commence an action or actions
against any and all debtors to recover the deficiency, unless such an
action is specifically prohibited by the mortgage.
Dated: October 20, 1995.
Henry G. Cisneros,
Secretary.
[The following appendix to part 29 will not be codified in title 24
of the Code of Federal Regulations.]
Appendix to Part 29: Nonjudicial Foreclosure of Single Family
Mortgages--Guide
Item
1. Purpose.
2. Scope and applicability.
3. Definitions.
4. Designation of foreclosure commissioner.
5. Prerequisites to foreclosure.
6. Commencement of foreclosure.
7. Notice of default and foreclosure sale.
8. Service of notice of default and foreclosure sale.
9. Presale reinstatement.
10. Conduct of sale.
11. Adjournment or cancellation of sale.
12. Validity of sale.
13. Foreclosure costs.
14. Disposition of sale proceeds.
15. Transfer of title and possession.
16. Redemption rights.
17. Record of foreclosure and sale.
18. Effect of sale.
19. Computation of time.
20. Deficiency judgment.
1. Purpose
The purpose of this guide is to present, in a single document,
the statutory and regulatory requirements of the Single Family
Mortgage Foreclosure Act of 1994 (the Act), 12 U.S.C. 3751-3768.
Although it presents the regulatory and statutory requirements in a
combined format, this guide is a secondary source for these
requirements. The Code of Federal Regulations (CFR), at 24 CFR part
29, is the primary, governing source for regulatory requirements,
and the Act is the primary, governing source for statutory
requirements.
The Act creates a uniform Federal remedy for foreclosure of
certain single family mortgages which are held by the Secretary of
Housing and Urban Development pursuant to Title I of the National
Housing Act, 12 U.S.C. 1702 et seq., Title II of the National
Housing Act, 12 U.S.C. 1707 et seq., or Section 312 of the Housing
Act of 1964, 42 U.S.C. 1452b (as it existed before repeal). The
Secretary's powers under the Act to appoint a foreclosure
commissioner or commissioners and substitute commissioners, and to
fix the compensation of commissioners have been delegated to the HUD
General Counsel.
The availability of uniform and more expeditious procedures,
with no right of redemption in the mortgagor or others, for the
foreclosure of these mortgages by the Department, will ameliorate
the negative consequences of the disparate State laws under which
mortgages covering one- to four-family residential properties are
foreclosed on behalf of HUD. The long periods of time that are
required under State law to complete foreclosure of such mortgages
lead to deterioration in the condition of the properties involved,
necessitate substantial Federal holding expenditures, increase the
risk of vandalism, fire loss, depreciation, damage, and waste with
respect to the properties, and adversely affect the neighborhoods in
which the properties are located. These consequences seriously
impair the ability of HUD to protect Federal financial interests in
the properties and frustrate attaining the objectives of the
underlying Federal program authority. Use of this nonjudicial
foreclosure procedure will also reduce unnecessary litigation, which
contributes to already overcrowded court calendars, by removing many
foreclosures from the courts.
2. Scope and Applicability
(a) Scope. Under the Act, HUD may foreclose on any defaulted
single family mortgage (as defined in section 3 of this appendix),
encumbering real estate in any State regardless of when the mortgage
was executed.
(b) Applicability. HUD, at its discretion, may use other
procedures to foreclose defaulted single family mortgages, including
judicial foreclosure in State or Federal Court, and nonjudicial
foreclosures under State law or any other Federal law.
3. Definitions
As used in this guide--
Act means the Single Family Mortgage Foreclosure Act of 1994.
Bona fide purchaser means a purchaser for value in good faith
and without notice of any adverse claim, and who acquires the
security property free of any adverse claim.
County means a political subdivision of a State or Territory of
the United States, created to aid in the administration of state law
for the purpose of local self-government, and includes a parish or
any other equivalent subdivision.
Mortgage means a deed of trust, mortgage, deed to secure debt,
security agreement, or any other form of instrument under which any
property (real or mixed real and personal), or any interest in
property
[[Page 57492]]
(including leaseholds, reversionary interests, and any other estates
under applicable State law), is conveyed in trust, mortgaged,
encumbered, pledged, or otherwise rendered subject to a lien for the
purpose of securing the payment of money or the performance of an
obligation.
Mortgage agreement means the note or debt instrument and the
mortgage instrument, deed of trust instrument, trust deed, or any
other similar instrument or instruments creating the security
interest in the real estate for the repayment of the note or debt
instrument, including any instrument incorporated by reference
therein and any instrument or agreement amending or modifying any of
the foregoing.
Mortgagor means the debtor, obligor, grantor, or trustor named
in the mortgage agreement and, unless the context otherwise
indicates, includes the current owner of record of the security
property whether or not such owner is personally liable on the
mortgage debt.
Owner means any person who has an ownership interest in the
property and includes heirs, devisees, executors, administrators,
and other personal representatives, and trustees of testamentary
trusts if the owner of record is deceased.
Person includes any individual, group of individuals,
association, partnership, corporation, or organization.
Record; Recorded means to enter or entered in public land record
systems established under State statutes for the purpose of
imparting constructive notice to purchasers of real property for
value and without actual knowledge, and includes ``register'' and
``registered'' in the instance of registered land, and ``file'' and
its variants in the context of entering documents in public land
records.
Secretary means the Secretary of Housing and Urban Development,
acting by and through any authorized designee exclusive of the
foreclosure commissioner.
Security property means the property (real or mixed real and
personal) or an interest in property (including leaseholds, life
estates, reversionary interests, and any other estates under
applicable law), together with fixtures and other interests subject
to the lien of the mortgage under applicable law.
Single family mortgage means a mortgage that covers property on
which there is located a 1- to 4-family residence, and that:
(1) Is held by the Secretary pursuant to title I or title II of
the National Housing Act (12 U.S.C. 1701 et seq.); or
(2) Secures a loan obligated by the Secretary under section 312
of the Housing Act of 1964 as it existed before the repeal of that
section by section 289 of the Cranston-Gonzalez National Affordable
Housing Act. A mortgage securing such a loan that covers property
containing nonresidential space and a 1- to 4-family dwelling is not
subject to foreclosure under the Act.
State means:
(1) The several States;
(2) The District of Columbia;
(3) The Commonwealth of Puerto Rico;
(4) The United States Virgin Islands;
(5) Guam;
(6) American Samoa;
(7) The Northern Mariana Islands; and
(8) Indian tribes, meaning any Tribe, band, group or nation,
including Alaskan Indians, Aleuts, and Eskimos, and any Alaskan
Native Village of the United States that is considered an eligible
recipient under Title I of the Indian Self-Determination and
Education Assistance Act (25 U.S.C. 450) or was considered an
eligible recipient under the State and Local Fiscal Assistance Act
of 1972 (31 U.S.C. 1221) before repeal of that Act. Eligible
recipients under the Indian Self-Determination and Education
Assistance Act are determined by the Bureau of Indian Affairs.
4. Designation of Foreclosure Commissioner
(a) The Secretary may designate a person or persons to serve as
a foreclosure commissioner for the purpose of foreclosing single
family mortgages, and such a foreclosure commissioner has a
nonjudicial power of sale as provided under the Act.
(b) The foreclosure commissioner, if a natural person, must be a
resident of the State in which the security property is located and,
if not a natural person, the foreclosure commissioner must be duly
authorized to transact business under laws of the State in which the
security property is located. No person shall be designated as a
foreclosure commissioner unless that person is determined by the
Secretary to be responsible, financially sound, and competent to
conduct a foreclosure. The method of selection and determination of
the qualifications of the foreclosure commissioner are at the
discretion of the Secretary, and the execution of a designation
pursuant to the Act is conclusive evidence that the commissioner
selected has been determined to be qualified by the Secretary.
(c) The Secretary designates a foreclosure commissioner by
executing a written designation stating the name and business or
residential address of the commissioner, except that if a person is
designated in his or her capacity as an official or employee of a
government or corporate entity, such a person may be designated by
his or her unique title or position instead of by name. The
designation is effective upon execution.
(d) The Secretary may designate, with or without cause, a
substitute foreclosure commissioner to replace a previously
designated foreclosure commissioner, by the procedure contained in
paragraph (c) of this item.
(1) A substitution of the foreclosure commissioner may be made
at any time prior to the time of the foreclosure sale, and the
foreclosure shall continue without prejudice, unless the substitute
commissioner, in that commissioner's sole discretion, finds that
continuation of the foreclosure sale will unfairly affect the
interests of the mortgagor. Any such finding must be in writing. If
the substitute commissioner makes such a finding, the substitute
commissioner will cancel the foreclosure sale, or adjourn the sale
as explained in item 11 of this appendix.
(2) If a substitute commissioner is designated, a copy of the
written notice of the designation referred to in paragraph (c) of
this item must be served:
(i) By mail, as described in item 8 of this appendix, (except
that the minimum time periods between mailing and the date of the
foreclosure sale do not apply); or
(ii) In any other manner which, in the substitute foreclosure
commissioner's sole discretion, is conducive to achieving timely
notice of such substitution.
5. Prerequisites to Foreclosure
(a) The Secretary may commence foreclosure of a single family
mortgage under the Act upon the breach of a covenant or condition in
the mortgage agreement.
(b) No foreclosure under the Act may be commenced unless any
previously pending judicial or nonjudicial proceeding that has been
separately instituted by the Secretary to foreclose the mortgage in
a manner other than under the Act has been withdrawn, dismissed, or
otherwise terminated.
(c) The Secretary will not institute any separate foreclosure
proceeding concerning a property while it is the subject of a
foreclosure pursuant to the Act.
(d) The Act does not preclude the Secretary from enforcing any
right, other than foreclosure, under applicable Federal or State
law, including any right to obtain a monetary judgment, or
foreclosing under the Act if the Secretary has obtained or is
seeking any other remedy available pursuant to Federal or State law,
or under the mortgage agreement.
6. Commencement of Foreclosure
If the Secretary determines that the prerequisites to
foreclosure set forth in item 5 of this appendix are satisfied, the
Secretary may direct the foreclosure commissioner to commence
foreclosure of the mortgage. Upon such request, the foreclosure
commissioner will commence foreclosure of the mortgage in accordance
with item 7 of this appendix.
7. Notice of Default and Foreclosure Sale
The commissioner commences the foreclosure by serving a Notice
of Default and Foreclosure Sale. The Notice sets forth the name,
address and telephone number of the foreclosure commissioner and the
date on which the Notice was issued, along with the following
information:
(a) The current mortgagee (that is, the Secretary), the original
mortgagee (if other than the Secretary), and the original mortgagor.
(b) The street address or a description of the location of the
security property and the legal description of the security property
as contained in the mortgage instrument.
(c) The date of the mortgage, the date the mortgage was
recorded, the office in which the mortgage is recorded, and the
liber and folio numbers or other appropriate description of the
location of recordation of the mortgage.
(d) Identification of the failure to make payment, including the
entire amount delinquent as of a date specified, a statement
generally describing the other costs that must be paid if the
mortgage is to be reinstated, the due date of the earliest principal
installment payment remaining wholly unpaid as of the date on which
the Notice is issued upon which the foreclosure is based, or a
description of any other default or defaults upon which foreclosure
is based, and the acceleration of the secured indebtedness.
[[Page 57493]]
(e) The date, time, and location of the foreclosure sale.
(f) A statement that the foreclosure is being conducted in
accordance with the Act.
(g) A description of the types of costs, if any, to be paid by
the purchaser upon transfer of title.
(h) The bidding and payment requirements for the foreclosure
sale, including the amount and method of deposit to be required at
the foreclosure sale, and the time and method of payment of the
balance of the foreclosure purchase price. The Notice must state
that all deposits and the balance of the purchase price must be paid
by certified or cashier's check. The Notice must also state that no
deposit will be required of the Secretary when the Secretary bids at
the foreclosure sale.
(i) Any other appropriate terms of sale or information as the
Secretary may determine.
8. Service of Notice of Default and Foreclosure Sale
The foreclosure commissioner will serve the Notice of Default
and Foreclosure Sale upon the following persons and in the following
manner, and no additional notice will be required to be served,
notwithstanding any notice requirements of any State or local law:
(a) Filing the notice. The Notice of Default and Foreclosure
Sale must be filed not less than 21 days before the date of the
foreclosure sale in the manner authorized for filing a notice of an
action concerning real property according to the law of the State in
which the security property is located, or if none, in the manner
authorized by Section 3201 of title 28, United States Code.
(b) Notice by mail. (1) The Notice must be sent by certified or
registered mail, postage prepaid, return receipt requested, to the
following (except that multiple mailings are not required to be sent
to any party with multiple capacities, e.g., an original mortgagor
who is the security property owner and lives in one of the units):
(i) The current security property owner of record, as the record
existed 45 days before the date originally set for the foreclosure
sale, whether or not the notice describes a sale adjourned as
provided in the Act. The Notice must be mailed not less than 21 days
before the date of the foreclosure sale to the current owner at the
last address known to the Secretary or the foreclosure commissioner
or, if none, to address of the security property, or, at the
discretion of the foreclosure commissioner, to any other address
believed to be that of the current owner.
(ii) The original mortgagor and all subsequent mortgagors of
record or other persons who appear on the basis of the record to be
liable for part or all of the mortgage debt, as the record existed
45 days before the date originally set for the foreclosure sale,
whether or not the Notice describes a sale adjourned as provided in
the Act, except that the Notice need not be mailed to any mortgagors
who have been released from all obligations under the mortgage.
Notice under paragraph (b) of this item must be mailed not less than
21 days before the date of the foreclosure sale to the last known
address of the mortgagors or, if none, to the address of the
security property, or, at the discretion of the foreclosure
commissioner, to any other address believed to be that of such
mortgagors.
(iii) All dwelling units in the security property, whether or
not the Notice describes a sale adjourned as provided in this part.
Notice under paragraph (b) of this item shall be mailed not less
than 21 days before the date of the foreclosure sale. If the names
of the occupants of the security property are not known to the
Secretary, or if the security property has more than one dwelling,
the Notice must be posted at the security property not less than 21
days before the foreclosure sale.
(iv) All persons holding liens of record upon the security
property, as the record existed 45 days before the date originally
set for the foreclosure sale, whether or not the notice describes a
sale adjourned as provided in the Act. Notice under this paragraph
(b) of this item must be mailed not less than 21 days before the
date of the foreclosure sale to each such lienholder's address of
record, or, at the discretion of the foreclosure commissioner, to
any other address believed to be that of such lienholder.
(2) Notice by mail is deemed duly given upon mailing, whether or
not received by the addressee and whether or not a return receipt is
received or the notice is returned. The date of the receipt for the
postage paid for the mailing may serve as proof of the date of
mailing of the notice.
(c) Publication. (1) A copy of the Notice of Default and
Foreclosure Sale must be published once a week during three
successive calendar weeks before the date of the foreclosure sale.
Such publication must be in a newspaper or newspapers having general
circulation in the county or counties in which the security property
being sold is located. A legal newspaper that is accepted as a
newspaper of legal record in the county or counties in which the
security property being sold is located is a newspaper having
general circulation for the purposes of this paragraph.
(2) If there is no newspaper of general circulation published at
least weekly in the county or counties in which the security
property being sold is located, copies of the Notice of Default and
Foreclosure Sale must be posted, not less than 21 days before the
date of the foreclosure sale, at the courthouse of any county or
counties in which the security property is located and at the place
where the sale is to be held.
9. Presale Reinstatement
(a) Except as provided in paragraph (d) of item 4 of this
appendix, paragraph (b) of this item, and item 11 of this appendix,
the foreclosure commissioner will withdraw the security property
from foreclosure and cancel the foreclosure sale only if:
(1) The Secretary directs the foreclosure commissioner to do so
before or at the time of the sale; or
(2) The foreclosure commissioner finds, upon application of the
mortgagor not less than three business days before the date of the
sale, that the default or defaults upon which the foreclosure is
based did not exist at the time of service of the Notice of Default
and Foreclosure Sale; or
(3) In the case of a foreclosure involving a monetary default,
there is tendered to the foreclosure commissioner before public
auction is completed all amounts that would be due under the
mortgage agreement if payments under the mortgage had not been
accelerated, all costs of foreclosure incurred for which payment
from the proceeds of foreclosure is provided in item 13 of this
appendix, and the foreclosure commissioner finds that there are no
nonmonetary defaults; provided, however, that the Secretary may
refuse to cancel a foreclosure sale pursuant to this subparagraph if
the current mortgagor or owner of record has, on one or more
previous occasions, caused a foreclosure of the mortgage, commenced
pursuant to the Act or otherwise, to be canceled by curing a
default; or
(4) In the case of a foreclosure involving a nonmonetary
default:
(i) The foreclosure commissioner, upon application of the
mortgagor before the date of foreclosure sale, finds that all
nonmonetary defaults are cured and that there are no monetary
defaults; and
(ii) There is tendered to the foreclosure commissioner before
public auction is completed all amounts due under the mortgage
agreement (excluding all amounts which would be due under the
mortgage agreement if the mortgage payments had been accelerated),
including all amounts of expenditures secured by the mortgage and
all costs of foreclosure incurred for which payment would be made
from the proceeds of foreclosure.
(b) Before withdrawing the security property from foreclosure
under paragraphs (a)(2), (a)(3), or (a)(4) of this item, the
foreclosure commissioner must notify the Secretary of the proposed
withdrawal by telephone or other telecommunication device and must
also provide the Secretary with a written statement of the reasons
for the proposed withdrawal along with all documents submitted by
the mortgagor in support of the proposed withdrawal. Upon receipt of
this statement, the Secretary has ten (10) days in which to
demonstrate why the security property should not be withdrawn from
foreclosure, and if the Secretary makes this demonstration, the
property will not be withdrawn from foreclosure. The Secretary will
provide the mortgagor with a copy of any statement prepared by the
Secretary in opposition to the proposed withdrawal at the same time
the statement is submitted to the foreclosure commissioner. If the
Secretary receives the foreclosure commissioner's written statement
less than 10 days before the scheduled foreclosure sale, the sale
will automatically be adjourned for 14 days, during which time it
may also be canceled. Under these circumstances, notice of the
rescheduled sale, if any, will be served as described in item 11(c)
of this appendix.
(c) If the foreclosure commissioner cancels the foreclosure, the
mortgage will continue in effect as though acceleration had not
occurred.
(d) Cancellation of a foreclosure sale will have no effect on
the commencement of a subsequent foreclosure proceeding.
(e) The foreclosure commissioner must file a notice of
cancellation in the same place and
[[Page 57494]]
manner provided for filing the Notice of Default and Foreclosure Sale
as provided in item 8 of this appendix.
10. Conduct of Sale
(a) The foreclosure sale will be conducted in a manner and at a
time and place as identified in the Notice of Foreclosure and Sale
and more fully described in this item. The sale will be scheduled
for a date 30 or more days after the due date of the earliest unpaid
installment as described in item 7(d) of this appendix, or the
earliest occurrence of a nonmentary default. The sale will be held
at public auction and must be scheduled to being at a time between
the hours of 9:00 a.m. and 4:00 p.m. local time. The sale will be
scheduled for a place where foreclosure real estate auctions are
customarily held in the county or counties in which the property to
be sold in located, or at a courthouse therein, or at or on the
property to be sold. If the security property is situated in two
counties, the sale may be held in any one of the counties in which
any part of the security property is situated.
(b) The foreclosure commissioner will conduct the foreclosure
sale in a manner that is fair to both the mortgagor and the
Secretary (see item 12 of this appendix), and consistent with the
provisions of the Act.
(c) The foreclosure commissioner will attend the foreclosure
sale in person or, if the commissioner is not a natural person,
through a duly authorized employee. If more than one commissioner
has been designated, at least one must attend the sale.
(d) In addition to bids made in person at the sale, the
foreclosure commissioner will accept written one-price sealed bids
from any party, including the Secretary, for entry by announcement
at the sale so long as those bids conform to the requirements
described in the Notice of Default and Foreclosure Sale. The
foreclosure commissioner will announce the name of each bidder and
the amount of the bid. The commissioner will accept oral bids from
any party, including parties who submitted one-price sealed bids, if
those oral bids conform to the requirements in the Notice of Default
and Foreclosure Sale. Before the close of the sale, the commissioner
will announce the amount of the high bid and the name of the
successful bidder.
(e) Notwithstanding the provisions of paragraph (d) of this
item, neither the foreclosure commissioner nor any relative, related
business entity, or employee is permitted to bid in any manner on
the security property subject to the foreclosure sale, except that
the foreclosure commissioner or an auctioneer may be directed by the
Secretary to enter a bid on the Secretary's behalf. Relatives of the
foreclosure commissioner who may not bid include parents, siblings,
spouses and children. A related business entity that may not bid or
whose employees may not bid is one whose relationship (at the time
the foreclosure commissioner is designated and during the term of
service as foreclosure commissioner) with the entity of the
foreclosure commissioner is such that, directly or indirectly, one
entity formulates, directs, or controls the other entity; or has the
power to formulate, direct, or control the other entity; or has the
responsibility and authority to prevent, or promptly to correct, the
offensive conduct of the other entity.
(f) The commissioner may serve as an auctioneer, or the
commissioner may employ an auctioneer to conduct the sale. If the
commissioner employs an auctioneer to conduct the foreclosure sale,
the auctioneer must be a licensed auctioneer, an officer of State or
local government, or any other person who commonly conducts
foreclosure sales in the area in which the security property is
located. The commissioner will compensate an auctioneer from the
proceeds of the commission described in item 13(e) of this appendix.
(g) The foreclosure commissioner may require a bidder to make a
deposit in an amount or percentage set by the foreclosure
commissioner and stated in the Notice of Default and Foreclosure
Sale before the bid is accepted.
(h) A successful bidder at the foreclosure sale who fails to
comply with the terms of the sale may be required to forfeit the
cash deposit or, at the election of the foreclosure commissioner
after consultation with the Secretary, will be liable to the
Secretary for any costs incurred as a result of such failure. If the
successful bidder fails to comply with the terms of the sale, the
HUD Field Office representative will provide instructions to the
commissioner about offering the property to the second highest
bidder, or having a new sale, or other instruction at the discretion
of the HUD representative.
11. Adjournment or Cancellation of Sale
(a) The foreclosure commissioner may, before or at the time of
the foreclosure sale, adjourn or cancel the foreclosure sale if the
foreclosure commissioner determines, in the foreclosure
commissioner's discretion, that:
(1) Circumstances are not conducive to a sale which is fair to
the mortgagor and the Secretary, or
(2) Additional time is necessary to determine whether the
security property should be withdrawn from foreclosure, as provided
in item 9 of this appendix.
(b) The foreclosure commissioner may adjourn a foreclosure sale
to a later hour the same day by announcing or posting, at the
original place of sale, the new time and place of the foreclosure
sale, which must be held between 9 a.m. and 4 p.m. at the original
place of sale.
(c) Except as provided in paragraph (b) of this item, the
foreclosure commissioner may adjourn a foreclosure sale for not less
than 9 and not more than 31 days, in which case the foreclosure
commissioner must serve a Notice of Default and Foreclosure Sale
that is revised to state that the foreclosure sale has been
adjourned to a specified date between the hours of 9:00 a.m. and
4:00 p.m. The revised Notice may include any other information the
foreclosure commissioner deems appropriate. Such Notice must be
served by publication and mailing as provided in item 8 of this
appendix, except that publication may be made on any of three
consecutive days prior to the revised date of foreclosure sale, as
long as the first publication is made at least seven days before the
revised sale date. Mailing may be made at any time at least seven
days before the date to which the foreclosure sale has been
adjourned. The commissioner must also, in the case of a sale
adjourned to a later date, mail a copy of the revised Notice of
Default and Foreclosure Sale to the Secretary at least seven days
before the date to which the sale has been adjourned.
12. Validity of Sale
Any foreclosure sale held in accordance with the Act and its
regulations is conclusively presumed to have been conducted in a
fair, legal, and reasonable manner. The sale price is conclusively
presumed to be reasonable and equal to the fair market value of the
property.
13. Foreclosure Costs
The following foreclosure costs are paid from the sale proceeds,
or from other available sources if sales proceeds are insufficient,
before satisfaction of any other claim to the sale proceeds:
(a) Advertising costs and postage expenses incurred in giving
notice described in items 8 and 11 of this appendix.
(b) Mileage by the most reasonable road distance for posting
notices described in item 8 of this appendix, and for the
foreclosure commissioner's or auctioneer's attendance at the sale.
The mileage is paid at the rate provided in 28 U.S.C. 1821.
(c) Reasonable and customary costs incurred for title and lien
record searches.
(d) The necessary out-of-pocket costs incurred by the
foreclosure commissioner for recording documents.
(e) A commission for the foreclosure commissioner (if the
foreclosure commissioner is not an employee of the United States)
for the conduct of the foreclosure in an amount to be determined by
the Secretary. A commission may be allowed to the foreclosure
commissioner notwithstanding termination of the sale or appointment
of a substitute commissioner before the sale takes place.
14. Disposition of Sale Proceeds
(a) The proceeds of the foreclosure sale are paid out in the
following order:
(1) To cover the costs of foreclosure described in item 13 of
this appendix.
(2) To pay valid tax liens or assessments on the security
property as provided in the Notice of Default and Foreclosure Sale.
(3) To pay any liens recorded before the recording of the
foreclosed mortgage which are required to be paid in conformity with
the Notice of Default and Foreclosure Sale.
(4) To pay service charges and advances for taxes, assessments,
and property insurance premiums which were made under the terms of
the foreclosed mortgage.
(5) To pay the interest due under the mortgage debt.
(6) To pay the unpaid principal balance secured by the mortgage
(including expenditures for the necessary protection, preservation,
and repair of the security property as authorized under the mortgage
agreement and interest thereon if provided in the mortgage
agreement).
(7) To pay any late charges or fees.
(b) Any surplus proceeds from a foreclosure sale will be
applied, after
[[Page 57495]]
payment of the items described in paragraph (a) of this item, in the
order as follows:
(1) To pay any liens recorded after the foreclosed mortgage in
the order of priority under the law of the State in which the
security property is located.
(2) To pay the surplus to the mortgagor.
(c) If the person to whom surplus proceeds are to be paid cannot
be located, or if the surplus available is insufficient to pay all
claimants and the claimants cannot agree on the allocation of the
surplus, or if any person claiming an interest in the mortgage
proceeds disagrees with the foreclosure commissioner's proposed
disposition of the disputed proceeds, the foreclosure commissioner
may deposit the disputed funds with a legally authorized official or
court. If a procedure for the deposit of disputed funds is not
available, and the foreclosure commissioner files a bill of
interpleader or is sued as a stakeholder to determine entitlement to
such funds, the foreclosure commissioner's necessary costs in taking
or defending such action are deductible from the disputed funds.
(d) The foreclosure commissioner will keep such records as will
permit the Secretary to verify the costs claimed, and otherwise to
enable the Secretary to audit the foreclosure commissioner's
disposition of the sale proceeds.
15. Transfer of Title and Possession
(a) If the Secretary is the successful bidder, the foreclosure
commissioner will issue a deed to the Secretary upon receipt of the
amount needed to pay the costs of tax liens and prior liens. See
items 14(a)(2) and (a)(3) of this appendix.
(b) If the Secretary is not the successful bidder, the
foreclosure commissioner will issue a deed to the purchaser or
purchasers upon receipt of the entire purchase price in accordance
with the terms of the sale as provided in the Notice of Default and
Foreclosure Sale.
(c) The deed or deeds issued by the foreclosure commissioner
shall be without warranty or covenants to the purchaser or
purchasers. Notwithstanding any State law to the contrary, delivery
of a deed by the foreclosure commissioner is a conveyance of the
property and constitutes passage of good and marketable title to the
mortgaged property. No judicial proceedings are required ancillary
or supplementary to the procedures provided under the Act and its
regulations to assure the validity of the conveyance or confirmation
of such conveyance. The purchaser of property under the Act is
presumed to be a bona fide purchaser.
(d) A purchaser at a foreclosure sale held pursuant to the Act
is entitled to possession upon passage of title under paragraph (c)
of this item, subject to any interest or interests that are not
barred, as described in item 18, below. Any person remaining in
possession of the property after the passage of title is deemed a
tenant at sufferance subject to eviction under applicable law.
(e) If a purchaser dies before execution and delivery of the
deed conveying the property to the purchaser, the foreclosure
commissioner will execute and deliver the deed to a legal
representative of the decedent purchaser's estate upon payment of
the purchase price in accordance with the terms of sale. Such
delivery to the representative of the purchaser's estate will have
the same effect as if accomplished during the lifetime of the
purchaser.
(f) When the foreclosure commissioner conveys the property to
the Secretary, no tax may be imposed or collected with respect to
the foreclosure commissioner's deed, including any tax customarily
imposed upon the deed instrument or upon the conveyance or transfer
of title to the property.
(g) The register of deeds or other appropriate official in the
county where the property is located must, upon tendering of the
customary recording fees, accept all instruments pertaining to the
foreclosure which are submitted by the foreclosure commissioner for
recordation. The instruments to be accepted include, but are not
limited to, the foreclosure commissioner's deed. If the foreclosure
commissioner elects to include the recitations described in item
17(a) of this appendix, in an affidavit or an addendum to the deed
as described in item 17(b) of this appendix, the affidavit or
addendum must be accepted for recordation. Failure to collect or pay
a tax as described in paragraph (f) of this item are not grounds for
refusing to record such instruments, for failing to recognize such
recordation as imparting notice, or for denying the enforcement of
such instruments and their provisions in any State or Federal Court.
(h) The Clerk of the Court or other appropriate official must
cancel all liens as requested by the foreclosure commissioner.
16. Redemption Rights
(a) There is no right of redemption, or right of possession
based upon a right of redemption, in the mortgagor or others
subsequent to a foreclosure completed pursuant to the Act. In regard
to the pre-emption of State laws regarding rights of redemption, a
foreclosure is considered completed upon the date and at the time of
the foreclosure sale.
(b) Section 204(l) of the National Housing Act, 42 U.S.C.
1710(l), and section 701 of the Department of Housing and Urban
Development Reform Act of 1989, 42 U.S.C. 1452c, do not apply to
mortgages foreclosed under the Act.
17. Record of Foreclosure and Sale
(a) The foreclosure commissioner must include in the recitals of
the deed to the purchaser, or in an affidavit or addendum to the
deed, the following items:
(1) The date, time, and place of the foreclosure sale.
(2) A statement that the foreclosed mortgage was held by the
Secretary.
(3) The date of the foreclosed mortgage, the date of the
recording of the mortgage that was foreclosed, the office in which
the mortgage was recorded, and the liber and folio numbers or other
appropriate description of the recordation of the mortgage.
(4) The details of the service of the Notice of Default and
Foreclosure Sale, including the names and addresses of the persons
to whom the Notice was mailed and the date on which the Notice was
mailed, the name of the newspaper in which the Notice was published
and the dates of publication, and the date on which service by
posting, if required, was accomplished.
(5) The date and place of filing the Notice of Default and
Foreclosure Sale.
(6) A statement that the foreclosure was conducted in accordance
with the provisions of the Act and with the terms of the Notice of
Default and Foreclosure Sale.
(7) The name of the successful bidder and the amount of the
successful bid.
(b) The foreclosure commissioner may, in his or her discretion,
make the recitations in paragraph (a) of this item in the deed or in
an affidavit or addendum to the deed, either of which is to be
recorded with the deed as provided in the Act.
(c) The items set forth in paragraph (a) of this item are prima
facie evidence of the truth of such facts in any Federal or State
court and evidence a conclusive presumption in favor of bona fide
purchasers and encumbrancers for value without notice. Encumbrancers
for value include liens placed by lenders who provide the purchaser
with purchase money in exchange for a security interest in the
newly-conveyed property.
18. Effect of Sale
A sale made and conducted as prescribed in the Act to a bona
fide purchaser bars all claims upon, or with respect to, the
property sold for the following persons:
(a) Any person to whom the Notice of Default and Foreclosure
Sale was mailed as provided under the Act, and the heir, devisee,
executor, administrator, successor or assignee claiming under any
such person.
(b) Any person claiming any interest in the property subordinate
to that of the mortgage if such person had actual knowledge of the
foreclosure sale.
(c) Any person claiming any interest in the property whose
assignment, mortgage, or other conveyance was not duly recorded or
filed in the proper place for recording or filing, or whose judgment
or decree was not duly docketed or filed in the proper place for
docketing or filing, before the date on which the notice of the
foreclosure sale was first served by publication, as described in
item 8(c) of this appendix, and the executor, administrator, or
assignee of such a person.
(d) Any person claiming an interest in the property under a
statutory lien or encumbrance created subsequent to the recording or
filing of the mortgage being foreclosed, and attaching to the title
or interest of any person designated in any of the foregoing
paragraphs.
19. Computation of Time
Periods of time provided for in the Act are calculated in
consecutive calendar days including the day or days on which the
actions or events occur, or are to occur. Any such period of time
includes the day on which an event occurs or is to occur.
20. Deficiency Judgment
If the price at which the security property is sold at the
foreclosure sale is less than the unpaid balance of the debt secured
by such
[[Page 57496]]
property after deducting payments in the order described in item 14 of
this appendix, the Secretary may refer the matter to the Attorney
General who may commence an action or actions against any and all
debtors to recover the deficiency, the only limitation on such
action being a prohibition against pursuit of a deficiency that is
specifically set forth in the mortgage.
[FR Doc. 95-28129 Filed 11-14-95; 8:45 am]
BILLING CODE 4210-32-M
